On February 3, 2015, HUD advised the County of Westchester that its failure to receive a grant for the 2012 fiscal year had resulted in the termination of its qualification as a Community Development Block Grant (“CDBG”) urban county and HOME participating jurisdiction, and that until it requalified, it was ineligible to receive CPD funds. In this appeal, the County challenged final administrative determinations by HUD to withhold funds allocated to the County under the Community Planning and Development Formula Grant Programs (“CPD funds”) for fiscal years (“FY”) 2011, 2013 and 2014. The County’s principal argument was that the conditions that HUD placed on the allocation of these CPD funds violated the Administrative Procedure Act, 5 U.S.C. §§ 701–706 (“APA”), and two other statutory provisions, 42 U.S.C. §§ 12705 and 12711, that generally prohibit HUD’s intrusion into local public policy. Pursuant to HUD regulations, the County must “conduct an analysis to identify impediments to fair housing choice within the jurisdiction” (an “analysis of impediments,” or “AI”). The County asserted that HUD’s repeated rejection of the County’s AIs relied on the substance of local zoning policies that HUD was not permitted to consider. The United States District Court for the Southern District of New York granted summary judgment to HUD and the County appealed.
Under the APA, a reviewing court must uphold agency action unless it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” Here, because exclusionary zoning can violate the FHA, and because HUD was required to further the policies of that statute, it was reasonable for HUD to require the County to include in its AI an analysis of its municipalities’ zoning laws. Moreover, whenever HUD rejected an AI submitted by the County, it provided a written explanation grounded in the evidentiary record, and gave the County multiple opportunities to make changes and to resubmit a revised AI. Accordingly, the court upheld the District Court’s dismissal of the claim that HUD’s action violated the APA. HUD did not tell the County that its CPD funds would only be released if certain municipalities in the County changed their zoning laws; instead, HUD required the County to assess and analyze whether certain zoning laws in the jurisdiction impeded fair housing and, if so, to identify a plan to overcome the effects of such impediments.
The County next argued that HUD may not, under either § 12705 or § 12711, condition funding on changes to local policies, including zoning laws. HUD did not at any point tell the County that its CPD funds would only be released if certain municipalities in the County changed their zoning laws, but instead required the County to assess and analyze whether certain zoning laws in the jurisdiction impeded fair housing and, if so, to identify a plan to overcome the effects of such impediments. Because HUD did not deny CPD funds to the County based on the “adoption, continuation or discontinuation” of a zoning ordinance by any municipality, it did not violate either § 12705 or § 12711. Because the court found that HUD may impose such a requirement on jurisdictions that apply for CPD funds, and because the decision to withhold Westchester County’s CPD funds in this case was not arbitrary or capricious, it concluded that HUD’s action complied with federal law.
County of Westchester v United States Department of Housing and Urban Development, 2015 WL 5616304 (2nd Cir. 9/25/2015)